The closing costs of a property referred to the one-time fees involved in closing the home deal. So, when investing in a home, factor in the closing costs for a place like Calgary, Canada.
Meanwhile, it’s a great feeling to find and buy a home, only that it takes more than the actual price tag.
Whereas there are other expenses along the closing process, the buyer and seller are both responsible.
In addition, this estimated total cost is given to the buyer for a payment, although sellers also pay a part.
At Jamie Newton & Associates, we commit ourselves to bringing you all the necessary information about acquiring properties in Canada.
Therefore, this article shows all you need to know about closing costs for homes in the Calgary neighbourhood of Canada.
What are Closing Costs?
By definition, closing costs refer to the administrative and legal fees incurred during the home purchase negotiation. And a buyer is expected to pay these fees before closing the home deal.
The term’ closing costs’ is so-called because it comes at the closing stages of the negotiation deal. Moreover, it must be paid before finalizing the whole purchase deal.
The buyer receives the closing costs estimate of about three days to finalize the home purchase deal.
However, the mortgage insurance and down payment are often not part of the closing cost calculation.
According to experts, 1.5-4% of the home purchase price can cover the closing costs of Calgary, Canada.
So, after you have an accepted offer and your approved mortgage, it remains the closing costs.
Although the buyer needs to pay the closing costs once, the costs of the components add up quickly during negotiation. Therefore, the investor must prepare ahead of the budget.
Furthermore, not all the fees inside the closing costs are mandatory. While some are negotiable, others are entirely up to the buyer to waive or collect.
Importance of Closing Costs
We now know what closing costs are; the next question is how important are they to the deal? Remember that the closing day is the day you take legal possession of your home.
One importance of the closing costs is that you cannot become a legal owner of the property without them.
In addition, it provides some measure of security through insurance and other legal fees.
Meanwhile, note that your real estate lawyer can help finalize and receive the transferred deeds in your name.
Common Categories of Closing Costs
As a potential buyer of a real estate property in Calgary, the following are some closing costs to watch out for;
A buyer doesn’t just get to own property except for a formal transfer, which attracts a tax.
Moreover, the property may be a house, land, or condo; the buyer has to pay for the transfer of ownership.
In the Alberta province, there are two categories of land transfer tax that a buyer should make;
- Property Value – ($50 base amount with $2 on every $5000 or equivalent portion value)
In other words, on a property that costs $300,000, the land transfer tax on property value is
$50 + ($2 x 60) = $170
- Mortgage Value – ($50 base amount with $1.50 on every $5000 or equivalent portion value)
On the mortgage value, the land transfer tax is
$50 + ($1.5 x 60) = $140
Therefore, the total land transfer tax on a property amount and mortgage is
$170 + $140 = $310
After submitting all legal documents, the buyer pays the land transfer tax to the Alberta Land Titles Office.
The property taxes accrue from the closing date to the end of the tax year and become part of the closing costs.
However, the seller may pay this fee before the closing date.
In such cases, the home buyer reimburses the seller for between $300 and $500.
New owners who acquire property must pay a lump sum for a year require these main insurance fees. However, the standard method is in monthly instalments.
The property insurance covers the property against any loss or damage and ranges between $700 and $1000. In addition, these fees are compulsory for buyers to qualify for mortgage plans.
Otherwise, if the buyer fails to pay for this insurance, he may forfeit the legal ownership of the property.
The importance of title insurance is to protect new owners against any dispute on the property.
Meanwhile, title insurance is different from property insurance, particularly on matters involving closing costs.
Moreover, the typical home buyer in Calgary pays about $300 to cover these fees as part of closing costs.
Legal fees are another critical component of closing costs on properties in Calgary, Canada.
Meanwhile, an all-important component of the legal fees is the Offer to Purchase and other documentation.
However, you need a real estate lawyer to review these documents and ensure you meet all the requirements.
In addition, the realtor or real estate representative also reviews the seller’s conditions.
Meanwhile, the amount a buyer is expected to pay may vary according to individual lawyers’ rates.
Since the legal fees are the responsibility of the lawyers, you need a professional realtor to handle your purchase deals.
A buyer or investor can expect to pay between $500 and $1500 in legal fees as part of closing costs in Calgary.
These two fees are due when the mortgage lender or provider requests an appraisal on the new property.
Meanwhile, the nature of the property determines how much you eventually pay for the appraisal.
For example, a large, unique, or highly rural home can cost $300 and $500 for property appraisal.
Similarly, a property survey may cost between $1000 and $2000 if need be.
On the other hand, some mortgage lenders may accept title insurance in place of a property survey.
The Estoppel Certificate cost is a separate fee for buyers of a straight unit of property or a condo. However, it depends on the outstanding payments that the previous owner has on the property.
In addition, it may attract some interest from other related dues. After payment, the buyer receives the certificate that costs about $200.
As for a new home in Calgary, the buyer must pay a Goods & Service Tax (GST) with the New Home warranty.
Bear in mind that these fees are mandatory in Alberta province, where Calgary costs about $2,000.
Frequently Asked Questions (FAQs) on Closing Costs
Expectedly, if you follow this article carefully, we mentioned that the estimate is between 1.5 and 4%.
In other words, if you buy a home for $200,000, prepare to pay between $3,000 and $8,000 as closing costs.
If you are a first-time buyer, you have the opportunity to ask for a waiver for some closing costs. At the same time, you should first get an approved mortgage to clarify your financial position in the deal.
For example, the HST/GST only applies to new homes and is waived for a resale property. In addition, the buyer can waive the need for the property survey fees if the former one is valid.
Another strategy to reduce your closing costs is to reschedule your first mortgage payment. That is, pay at exactly one price after the closing date of the home purchase.
The simple answer is yes; the seller pays for the real estate agent commissions split between both parties. On the other hand, if there are pre-inspection fees, the seller can take care of it.
The seller helps the buyer put his mind at rest by taking care of the home inspection fees. Thereby, the buyer can trust that the home purchase is a good investment.
Who Pays Closing Costs in Calgary?
Closing costs in Calgary are a shared responsibility between the buyer and the seller of the real estate property.
Meanwhile, the buyer pays a more significant part of the cost except for the real estate agent’s commission.
Conversely, if a seller closes the mortgage before the maturity, he pays the legal and mortgage discharge fees.
Similarly, a seller may pay all the closing costs to attract first-time buyers if the market is highly competitive.
Moreover, it can become an incentive for these buyers who may not have a sufficient budget to cover essential closing costs.
In addition, the buyer can also negotiate with the seller for some part of the closing costs.
For more help and clarity on which part of the fees you are expected to pay, let Jamie Newton & Associates help you.
Now, you have a good idea of closing costs and how to prepare for them, but what’s next?
As a richly experienced realtor in Calgary, Jamie Newton can take you through the step-by-step process of owning a home.
Notably, our experience with closing costs in Calgary ensures that your budget covers all your expected payments.
Moreover, we provide professional guidance, but we also offer representation on fulfilling the details and terms of the agreement.
Jamie Newton & Associates brings a detailed account of the closing costs you need to pay for Calgary homes.
Moreover, we remove any stress of calculating what the closing costs may amount to and guide you.
Our Alberta office is open at 403-837-9300, or you can send an email to [email protected].